Morning Scan
The Scan for Wednesday, July 20

Breaking News This Morning ...

PNC, USB and M&T: "PNC Financial Services Group Inc., U.S. Bancorp and M&T Bank Corp. notched solid second-quarter profit gains as the three regional lenders continued to see marked declines in the funds reserved to cover potentially bad loans." (Journal)

Receiving Wide Coverage ...

2Q Earnings: Despite the tepid economy, several big commercial banks sounded hopeful notes about business loan growth, the Journal reports. "KeyCorp went as far as to call the period an inflection point for lending, and Wells Fargo shined the brightest, showing 7.5% growth" in the C&I portfolio. However, the Times also notes that Wells' results benefited from a $1 billion release of loan-loss reserves. Meanwhile, Goldman Sachs' $1.05 billion profit came in well short of expectations. The Journal's "Heard on the Street" called the results "very un-Goldman-like." The soft showing reflected the investment bank's uncharacteristically risk-averse behavior during the period. In an interesting flourish for quarterly earnings stories, the main Journal story and the Times' Dealbook both resort to citing anonymice on the details of Goldman's newfound caution. Here's Dealbook: "The firm substantially reduced its risk, … an overly conservative approach that cost millions in the short term, said a person with knowledge of the matter who was not authorized to speak on the record. Goldman, in part, hedged its trading activities, a move that ate into profit. It also robbed the company of the upside in certain commodities like oil, the person said." (Love the use of "rob" and "oil" in same sentence — shades of Dos Passos.) Another Dealbook story focuses on the performance of big banks' credit card operations. Bank of America's second-quarter credit card revenue fell about 20 percent largely because of lower average loan balances and interest rates. Meanwhile, Wells Fargo's credit card business, which is smaller than its rivals', saw a slight increase in loan balance because it picked up market share from rivals. Finally, after posting a loss of nearly $9 billion, Bank of America executives "remained adamant" that it does not need to raise capital to meet the new Basel III standards being phased in over the next decade. Read CEO Brian Moynihan's lips: "we don't need to raise capital."

Dodd-Frank Look-Backs: The retrospectives continue in this morning's papers. A story on the front page of the Journal's "Money and Investing" section focuses on the rule-writing burden the law has placed on the already-understaffed S.E.C. and CFTC. "Some employees are being pulled away from their enforcement and oversight duties." (Perhaps in a wink at those readers who feel the true burden is on private enterprise, the headline and accompanying infographic reference "Atlas Shrugged.") In the Journal's opinion section, Treasury Secretary Tim Geithner has an op-ed defending Dodd-Frank, regulators' progress implementing it, and the administration's overall record cleaning up after the crisis. On the page opposite, the Journal's editorial writers lambaste Richard Cordray, Obama's nominee to lead the Dodd-Frank-created Consumer Financial Protection Bureau, calling him "a junior achievement Elizabeth Warren."

New York Times

Federal officials arrested more than a dozen suspected hackers in connection with last December's attack on PayPal. That attack, you may recall, was payback for PayPal's refusal to process credit card donations to WikiLeaks. "All of the defendants charged in the case are between the ages of 20 and 33 years old." These kids today …

And, Lastly ...

The New Yorker: "Ray Dalio is the kindest, bravest, warmest, most wonderful human being I've ever known in my life." No, that's not an actual quote. But it's what you might expect to hear each and every employee of Bridgewater Associates say after you read John Cassidy's profile of Dalio, the hedge fund's founder. Dalio and his fans attribute much of Bridgewater's success to its unique corporate culture, but critics describe the place as a cult. Cassidy paints a somewhat more nuanced picture. "The word 'cult,' " he writes, "clearly has connotations that don't apply to an enterprise staffed by highly paid employees who can quit at any moment. But Bridgewater's headquarters are in the woods, isolated from any other financial institution; Dalio is a strong-willed leader; and the employees do use their own vocabulary—Dalio's vocabulary." You may feel a bit of a chill when you read the parts where those workers parrot Dalio-isms like "understanding how the machine works" and "radical transparency." Then again, Dalio was one of those who correctly predicted the housing crash, and Bridgewater handily outperforms other hedge funds, so we might just want to sip some of that Kool-Aid ourselves.

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